Marking the latest vote of confidence in real estate crowdfunding, RealtyMogul.com has raised an additional $35 million in funding.
The real estate crowdfunder will use the funds to expand its geographic footprint and invest in technology that can help the firm assess the risk of different real estate investment opportunities.
Real estate crowdfunding allows investors to buy slices of residential, commercial and industrial properties, or fund loans used to buy such properties. Among other real estate investor types, home flippers are tapping the funding platforms for cash to purchase and renovate properties, and then are selling those properties at a profit.
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For example, RealtyMogul.com recently cobbled together $750,000 from investors and lent the money to a home flipper. The home flipper will use the cash to finish off renovations to a property in Brooklyn, New York, and pay back the loan over time, resulting in returns for RealtyMogul.com investors (if all goes well, of course).
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RealtyMogul.com has financed $70 million for 240 properties to date, according to its website, and grown from 10 to 80 employees over the last year.
RealtyMogul.com says it serves the following groups:
- Accredited or institutional investors looking to diversify their portfolios
- Borrowers in search of “flexible debt” (such as home flippers)
- Real estate sponsors looking for “joint venture equity”
Most real estate crowdfunders allow only accredited investors — investors who are worth at least $1 million or have made at least $200,000 a year for the last two years — to invest in their deals.
New regulation has made it easier for crowdfunders to advertise investment opportunities to the public and raise money from nonaccreddited investors.
But many crowdfunders, RealtyMogul.com included, choose not to publicly market their deals or sell stakes in them to nonaccredited investors because doing so can be costlier or carry more legal risks than making the deals available, both for viewing and investment, only to accredited investors.
But real estate crowdfunding has begun to emerge as a viable alternative to traditional financing, growing by 56 percent in 2014 to just over $1 billion in funding volume, with campaigns ranging in size from less than $100,000 to over $25 million, according to a recent report.
Firms operating in the space have attracted more interest from startup investors than any other category of real estate tech company, landing $134 million in funding in the first half of 2015 to accelerate their growth, according to RE:Tech, a consultancy that advises companies on real estate technology.
“We’re seeing online marketplaces massively transforming other industries, and RealtyMogul.com’s growth path clearly shows they’re poised to be the key disruptor in the huge asset class of real estate investing,” said Rob Rueckert, head of Sorenson Capital’s technology practice and a RealtyMogul.com board member, in a statement.
Sorenson Capital led the Series B funding round, while Canaan Partners, the lead investor in the RealtyMogul.com’s $9 million Series A financing round, also chipped in.
What sets real estate crowdfunding apart from its offline predecessor, “real estate syndication,” is that it brings more access and transparency to the marketplace.
By putting investments online, real estate crowdfunders can attract more potential investors and sell shares in properties for hundreds or thousands of dollars, instead of the hundreds of thousands typically needed to buy into deals engineered through traditional real estate syndication.
Real estate crowdfunding also makes it easier for investors to keep tabs on their investments.
Realty Mogul offers investors a dashboard that helps them track their investments performance and keeps its investors in the loop by producing webinars and Q&A lists for each investment.
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